2.1 Causes of Loss / Named-Peril vs. Open-Peril

How Property Policies Define What They Cover

Property insurance pays for direct physical loss to covered property caused by a covered peril. A peril is the cause of loss (fire, windstorm, theft); a hazard is a condition that increases the chance or severity of a peril. Exam writers love the peril/hazard distinction, so anchor it now: a frayed extension cord is a physical hazard; concealing a prior arson conviction is a moral hazard; an insured who stops locking the door because "insurance will pay" is a morale hazard.

The single most tested structural concept is how a policy lists covered perils. There are two methods, and they shift the burden of proof in opposite directions.

Named-Peril (Specified-Peril) Coverage

A named-peril form covers only the perils specifically listed in the policy. If the cause of loss is not on the list, there is no coverage. The burden of proof is on the insured to show the loss was caused by a listed peril.

The classic named-peril sets appear on ISO Dwelling and Homeowners forms:

• Basic Form Causes of Loss (CP 10 10) for commercial property; on dwellings the DP-1 covers fire, lightning, internal explosion (with the Extended Coverage and V&MM options adding the others).
• Broad Form adds perils such as weight of ice/snow/sleet, falling objects, and accidental water discharge.
• The familiar Homeowners HO-2 broad-form list and the Coverage C (personal property) perils on HO-3.

Open-Peril (Special-Form / All-Risk) Coverage

An open-peril form covers all direct physical loss except perils specifically excluded. The burden of proof shifts to the insurer to prove an exclusion applies. This is broader coverage and costs more. ISO labels it the Special Form; the commercial version is Causes of Loss – Special Form (CP 10 30), and on homeowners the HO-3 dwelling (Coverages A & B) and HO-5 (dwelling and contents) are open-peril.

Trap: HO-3 is open-peril on the building but named-peril on personal property (Coverage C). HO-5 makes both open-peril. This split is a perennial exam question.

Standard Exclusions and the Anti-Concurrent-Causation Clause

Open-peril forms still exclude predictable, catastrophic, or maintenance-type losses: flood, earthquake, war, nuclear hazard, ordinance or law, intentional acts, wear and tear, mechanical breakdown, and government seizure. The anti-concurrent-causation (ACC) clause states that an excluded peril is excluded even if a covered peril contributes concurrently or in any sequence to the loss — so if a hurricane drives both wind (covered) and flood (excluded), the flood-caused damage is excluded despite the covered wind occurring at the same time.

Named-Peril vs. Open-Peril Burden of Proof

The single most tested distinction in this topic is the burden of proof. Under a named-peril (specified-peril) form, the insured must prove the loss was caused by a peril listed in the policy. Under an open-peril (special / "all-risk") form, coverage is presumed and the insurer must prove an exclusion applies to deny the claim. This shift is why open-peril forms cost more and why exam stems hinge the answer on who carries the burden.

The Standard Property Peril Lists

ISO builds property forms from a layered set of perils. Memorize the progression from basic to broad:

Concurrent Causation and Anti-Concurrent Language

When two perils combine to cause one loss - one covered, one excluded - courts historically applied the concurrent-causation doctrine to favor coverage. Insurers responded with anti-concurrent-causation (ACC) lead-in wording ("We do not pay for loss... regardless of any other cause or event contributing concurrently or in any sequence"). The flood and earth-movement exclusions carry this language, which is why wind-driven storm surge is frequently denied even when covered wind also blew. Expect a question testing whether an ACC clause defeats a partly covered loss.

Ensuing-Loss and the Exception to the Exclusion

Many exclusions contain an ensuing-loss exception: the excluded peril itself is not covered, but a covered peril that results from it is. Classic example - faulty construction is excluded, but if the defect causes a covered fire, the fire damage is paid. Distinguishing the excluded root cause from the covered ensuing peril is a reliable exam trap, especially in water-damage and defective-workmanship fact patterns.

Proximate Cause in Property Losses

Property coverage also turns on proximate cause - the dominant, efficient cause that sets the chain of events in motion. When a covered peril proximately causes an otherwise-excluded type of damage, coverage generally follows the covered cause; when an excluded peril is the proximate cause, the loss is excluded even if a covered peril appears later in the sequence (subject to ensuing-loss exceptions).

This is why a covered fire that the fire department extinguishes with water yields covered water damage - the proximate cause is the covered fire. Distinguishing proximate cause from a remote contributing cause is the analytical skill the exam rewards in causation questions.